Deed of variation to set up trust and recoup IHT

sphwuss

My Mum died 23 months ago, my Dad 12 months before that. Upon my Mum's death, myself and my 2 brothers inherited equally, having executed the will, sold the house, liquidated investments and paid the requisite IHT. The distribution has been made and the process completed. We used a solicitor at relatively low cost due to them being a friend of the family but the process was painfully slow and I did quite a bit of the work, from time to time I had to correct the plans/actions of the solicitor having done a bit of research on here. One of my brothers is questioning whether he can quickly make a deed of variation to my Mum's will (with the other two brothers consent and within the 24 month deadline) to set up a trust into which he will pay a part of his share in order to recoup some of the inheritance tax paid. I told him I think its unlikely and probably he will not get a quick or correct answer from our solicitor (she is not a specialist) I think it won't be feasible but in the first step, as I have read posts from some extremely knowledgeable posters I would ask here. If theoretically feasible, I have advised him he would then be better served approaching a suitably qualified solicitor (STEP?)


I totally understand the moral argument of paying what is due (we have) but he finds himself in a situation where he may have a life limiting condition which means he has to give up his business/livelihood and he would therefore want to somehow maximise income from this potential trust.


Thanks in advance for any clarification that can be offered.

leespot

As far as I know there is no retrospective way of reclaiming IHT?

securityguy

Leaving aside the practicality and timescales and recoupability, why does your brother think that setting up a trust post-mortem will reduce IHT?

The IHT is paid by the estate, not the beneficiaries, and it doesn't usually matter how the money is dealt with once distributed, it's the fact that the estate has the money which triggers the liability (I am aware of the exemptions for charitable donations).

Had the original will set up a trust, the money passing into the trust would still have been liable for IHT. So a deed of variation, even if possible, would not alter the liability for IHT, even if it can be reclaimed.

There are various schemes in which trusts are set up _before_ death, ideally seven or more years before death, so that assets can be "protected" from IHT. Leaving aside morality issues, the time for doing that has long passed.

sphwuss

Thanks for the fast clarification securityguy, really appreciated. I will give my Brother a call and let him know.

getmore4less

I can't see how a DOV would reduce mums estate for IHT liability.

You did use the transferable nil rate band(if any) available from dads estate.

sphwuss

Hi getmore4less, yes we used Dad's nil rate band in its entirety as well as gifts from income.